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Samsung’s New Smartphone Strategy Is So Unimaginative It Just May Work

In case you missed it, Samsung may start to resemble Apple going forward.

When it comes to the premium smartphone market, there are really only two vendors that matter: Apple(NASDAQ:AAPL) and Samsung(NASDAQOTH:SSNLF). Other manufacturers either operate primarily in the low-end market -- Xiaomi -- or currently lack the high-end market share -- LG, HTC, and Nokia -- to warrant inclusion in the premium smartphone conversation.

However, when it comes to execution, there's not really a comparison. On one hand, Apple had its greatest fiscal quarter ever and produced the highest net income for any publicly traded company at $18 billion. On the other hand, Samsung has struggled over the last two fiscal quarters by reporting a year-over-year operating profit drop of 60% in its third fiscal quarter followed by another 35% year-over-year decline in the fourth fiscal quarter. The company specifically mentioned smartphones as the reason behind the drop.

Subsequently, mostly gone are the tongue-in-cheek commercials playing up Samsung's advantages at the expense of Apple. Instead, analysts have found Samsung's strategy lacking. However, more recently a faint outline of Samsung's plans have emerged ... and it's so unimaginative it just may work.

If you can't beat 'em, copy 'emSamsung's newest path forward can best be described by a twist on a popular maxim: If you can't beat 'em, copy 'em. If you've been looking at the leaked Samsung Galaxy S6 reports, it appears the newest iteration of the Galaxy will look a lot like the iPhone 6. Unless Jony Ive has been moonlighting in South Korea, it appears Samsung's taking heavy design cues from Cupertino. And this isn't only one report: Korean site UnderKG, French blog Nowhereelse, and The Korean Times all note the newest Galaxy will look like the iPhone 6.

Phones design and form factors aside -- after all, there's only so much deviation in smartphones today -- it appears Samsung is looking to copy Apple in experience as well. According to Cult of Android, Samsung is looking to place authentication chips in the Galaxy S6. This does two things: first, it helps Samsung develop a mini-ecosystem among its devices for accessories; second, it helps the company defend the company from unauthorized third-party devices.

There are limits to this strategy, however, as Samsung uses Google's Android operating system, but establishing an ecosystem within an ecosystem may help Samsung sell accessories and improve customer stickiness (read: limit Apple defections).

Hasn't this strategy hasn't been copied by Xiaomi...and Apple? The key question is will this strategy work? And if Xiaomi is a case example, the answer is a resounding yes. The company has went from obscurity to the fourth-largest vendor, according to Gartner, by essentially copying Apple in everything from phone design to CEO Lei Jun's choice of clothing (black top and blue jeans reminiscent of Steve Jobs). However, Xiaomi has maintained a low-end/developing-marketstrategy that centers on its home market of China. There's no guarantee this strategy will work in developed markets.

Samsung chided Apple for copying, but is now doing the same thing. Source: Samsung

But Samsung may be further encouraged by the company it's looking to copy: Apple. The iPhone 6 and iPhone 6 Plus iterations' key differentiator from prior versions is its increased size, and that turned out well for Cupertino. If you remember, Samsung was the first premium vendor to boast the bigger size and even chided Apple for changing their mind on a larger form factor. This turned out to be a great move for Apple.

In the end, Samsung's strategy of copying Apple may just be unimaginative enough to work. By essentially copying Apple, the company looks to compete mostly on operating system. The best case for Samsung is it has a Samsung Galaxy S4-type success that competes with Apple; worst case, the copycat Galaxy S6 slows the migration from Samsung to Apple as OS-neutral buyers remain with Samsung.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple, Gartner, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Author

Inspired by the idea of "making your money work for you" at a young age, mostly because he was a lazy child, Jamal parlayed that inspiration into a love of the psychology of markets, competitive advantages, and thematic investing. He later shrug off that laziness, with a career that included stints as a mortgage trainer, a financial advisor, a Sr. Investments Communications Specialist, and a stockbroker. Jamal graduated from George Mason University with a bachelors of science in finance, American University with a masters in finance, and is a CFA charterholder.